Strategy: the concentrated-stock toolkit
The position arrived on a schedule. So should the exit.
A concentrated stock position comes down through seven tools: staged sales, often inside a Rule 10b5-1 plan; gifts of long-term lots to a donor-advised fund or charitable remainder trust; direct indexing that harvests offsetting losses; net unrealized appreciation for company stock in a 401(k); exchange funds; collars or prepaid forwards; and gifts to family. Each pays, defers, or removes the tax on a different schedule, and in 2026 the federal long-term rate on a joint return reaches 20% above $613,700 of taxable income. We read the constraints first, set a ceiling and a gain budget, then choose the two or three tools that fit.
The situation
Most large positions were never bought.
They accumulated: a quarterly vest that was never sold, an option exercise in a good year, a 401(k) match paid in company shares, a tender offer declined. The household now holds a position that pays little, cannot be sold in a closed window, and carries a gain that grows with every year it is left alone.
The site covers each piece in depth. The executive page follows the vesting calendar, and the guides take one decision at a time: RSU withholding, ESPP timing, ISO exercises and the AMT, the 83(b) election, tender offers, and lockup releases. Employer-specific plans are covered on the NVIDIA, Apple, Google, and Meta pages.
This page is the method: what the seven tools are, what each costs, when each fits, and the order we decide in. Read out of sequence, the tools compete with one another. Read in sequence, each answer narrows the next decision until what is left is a schedule.
Why it’s complex
Five trade-offs the position forces
The policy decides before you do
Insider trading policies, filed publicly since 2024, often ban hedging, pledging, and in some cases exchange funds for covered employees, and a lockup bars every hedge. The available toolkit is set by your employer first and your net worth second.
Read the guideWithholding is not the tax
A vest is wages, withheld at a flat 22% on the first $1 million of supplemental pay in a year. A household in the 35% bracket is short 13 cents on every vested dollar, and the shortfall arrives in April unless a sale at vest or an estimated payment closes it.
Read the guideThe tax touches the gain; the risk touches the position
Federal tax on a long-term gain tops out at 23.8% of the gain, and the gain is a fraction of the holding. Declining the tax to keep the whole position is a risk decision, and it deserves to be made as one.
Read the guideA written plan beats an open window
A Rule 10b5-1 plan lets sales run through closed windows, but it cannot trade for 30 days after adoption, or 90 to 120 days for directors and officers. A schedule adopted late can leave a release date unsellable.
Read the guideOptions carry two clocks
An ISO exercise adds the spread to alternative minimum taxable income, and long-term treatment needs two years from grant and one from exercise. Exercising and selling are separate decisions, often in separate tax years.
Read the guideSources: IRS Rev. Proc. 2025-32, §3.03; 26 U.S.C. §170(b)(1)(I); 26 U.S.C. §704(c)(1)(B) and §737; 26 U.S.C. §1091.
Our approach
Decided in order, then run on a schedule
We do not begin with a tool. We begin with what the position is allowed to do, what it is for, and how much gain the household can afford to recognize in a year. The tools follow from those three answers, and most households end up using two or three of them, not seven.
Read the constraints
Your insider trading policy, any lockup agreement, the blackout calendar, and pre-clearance rules go on one page next to a lot inventory: acquisition date, basis, holding period, and award type for every share. The cheapest lot to sell is rarely the one a brokerage picks by default, and the policy usually removes several tools before anyone has to choose.
Set the ceiling
We express the holding as a share of everything the household has invested and ask one question: if this stock fell by half, would the plan change? The largest share that still earns a no is the ceiling. It belongs to the household, not to the price, and it sets how much has to move.
Budget the gain
Long-term gains are taxed at 0%, 15%, or 20% by taxable income; in 2026 the 15% band on a joint return runs from $98,900 to $613,700, with 3.8% net investment income tax above $250,000 of modified adjusted gross income. We set a gain budget for each year, fill it from the highest-basis long-term lots, and reserve low-income years, such as the year after leaving, for the largest sales.
Choose the tools that fit
Staged sales, often inside a 10b5-1 plan, do most of the work for most households. Long-term lots go to a donor-advised fund or charitable remainder trust where the household gives anyway; a direct-indexed core harvests losses against the sales; company stock in a 401(k) is reviewed for net unrealized appreciation before any rollover; and shares meant for family are weighed against the step-up at death. Exchange funds, collars, and prepaid forwards enter only where the policy permits, the position is large enough, and the household meets the eligibility tests.
Run it and rebuild
Sales execute, harvested losses net against them, and proceeds go into the portfolio the plan was designed around. Withholding on new vests is checked against the bracket, and our Quarterly Rounds keep cash flow, risk, estate, and tax in sequence as the position comes down.
The work
What you’ll work through with us
- A lot inventory with basis, holding period, and award type for every share
- A concentration ceiling and an annual gain budget set against the 2026 brackets and the net investment income tax
- Rule 10b5-1 plan design, coordinated with your company’s counsel
- Lot selection for gifts to a donor-advised fund or charitable remainder trust, with your CPA
- A direct-indexed core that excludes the employer and harvests offsetting losses
- A net unrealized appreciation analysis for company stock in the 401(k) before any rollover
- Diligence and sizing of exchange funds, collars, or prepaid forwards where permitted and eligible
- Sell-at-vest, ESPP, and exercise rules for new grants, with withholding checked each quarter
Concentrated stock and equity award planning at the firm is led by Theo Halbardier, CFP®, CIMA®, CAIA®, the firm’s founder. The CIMA® work is the portfolio a position becomes once it is sold; the CAIA® work is the diligence on exchange funds and hedging structures when they fit. We are fee-only: no commissions, no product sales. About Theo
Questions
Common questions about concentrated stock
How much of my net worth in one stock is too much?
There is no single percentage. The test we use is whether the plan would change if the stock fell by half; the largest share that still earns a no is the ceiling. For a household whose retirement depends on the position, that number is usually well below where an unsold vesting schedule has taken it. The ceiling sets how much has to move, and the gain budget sets how fast.
Should I sell RSUs as soon as they vest?
Usually, unless there is a specific reason to hold. The vest-date value is already taxed as wages and becomes your cost basis, so selling at vest creates almost no additional tax. Holding is a decision to buy the stock with after-tax money. It can be the right decision, but it should be sized against the ceiling rather than made by default.
Can I diversify without paying capital gains tax?
Partly. A gift of long-term shares to a donor-advised fund removes the gain; an exchange fund defers it for at least seven years; net unrealized appreciation moves company stock out of a 401(k) at long-term rates; and shares held until death receive a stepped-up basis. Everything else pays the tax on some schedule, and the planning question is which schedule the household can afford.
What is net unrealized appreciation, and when does it matter?
It is the growth in employer stock held inside a 401(k). Under IRC §402(e)(4), if the whole plan balance is distributed in one tax year after separation, age 59½, disability, or death, the shares can move to a taxable account with only the original cost taxed as ordinary income; the appreciation is taxed at long-term rates when sold. It matters most when the cost is low and the balance is large, and it is lost if the shares are rolled into an IRA first.
Which tools are unavailable while I still work at the company?
Often the hedging ones. Many insider trading policies prohibit collars, forwards, swaps, and pledging for covered employees at all times, and some name exchange funds. Shares under a lockup cannot be hedged at all. What generally remains is staged selling, a 10b5-1 plan, charitable gifts of long-term lots, and direct indexing around the position. We read the policy before proposing anything.
Who is eligible for an exchange fund?
Exchange funds are private offerings, generally limited to accredited investors under Rule 501(a): net worth over $1,000,000 excluding the primary residence, or income over $200,000, $300,000 with a spouse, in each of the last two years. Many funds go further and accept only qualified purchasers with at least $5,000,000 in investments. Funds also cap how much of one stock they accept, so eligibility is the last gate, after the policy and the size of the position.
How are you paid on the tools you recommend?
By clients only. We are fee-only and receive nothing from an exchange fund, a dealer, a donor-advised fund sponsor, or any product used to reduce a position, so the recommendation stays separate from the sale. When a tool carries its own fees, such as an exchange fund or a remainder trust, we show them next to the tax they defer.
Reviewed by Theo Halbardier, CFP® · Updated September 2026 · Figures current for 2026
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